Gold flirts with break of 200-day moving average after earlier dip

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Price action centers around the 200-day moving average to start the session

Gold D1 14-01
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The report on Biden’s $2 trillion stimulus earlier prompted a move higher in real yields and that led to a shove lower in gold, taking it to a low of $1,829.53 in Asia Pacific trading.

Since then, price has bounced back a little towards the 200-day moving average (blue line), now seen @ $1,842.68. That has been the key technical level that has supported the latest drop in gold in the past week but is being called into question again.

Keep above that and buyers still have a key line of defense to start the new year but hold a break below and sellers will establish a more bearish bias instead.

Just below that, there is a key trendline support stretching back to March last year @ around $1,819 to watch for. That will provide an additional layer of support before we get to $1,800 and then the 30 November low @ $1,764.80.

As much as the jump in real yields on the back of Biden’s “trillions in spending” sounds enticing, it is likely to prove to be short-lived unless there is a clear path for things to go smoothly in Congress and more importantly, if the Fed decides to alter its stance.

The market will be taking clues from Fed chair Powell’s speech later on as well so look out for that in case he mentions anything on the timeline to scale back easing measures.

As things stand, I’d argue that the latest pullback in gold continues to be one that should be bought on dips – unless something changes on the Fed front.

The flush lower may still carry gold down below $1,800 but I would expect stronger bids to surface once we get closer to the end-November low.